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Conduct laws finally real

New conduct rules for the financial services sector have passed through Parliament .

Thursday, June 30th 2022, 8:17AM 8 Comments

by Eric Frykberg

The Financial Markets (Conduct of Institutions) Amendment Bill (COFI) has passed its third reading in parliament.

It imposes new rules on banks, insurance companies and non-bank deposit takers.

It requires these institutions to hold a market services licence as a financial institution and implement a written programme that complies with the principle of fair conduct.

As reported earlier by Good Returns, the law also bans sales incentives based on volume or value for staff selling certain types of financial products.

The final law also waters down originally-proposed controls on intermediaries such as advisers who have their own licensing arrangements under the FAP programme.

The law was highly controversial as it was going through parliament. Critics accused it of duplicating existing legislation and not even being clear about the problem it was supposed to be fixing.

But the Minister of Commerce and Consumer Affairs David Clark said it would make sure that financial institutions put customers before profits.

“This work comes at an important time as the Government supports Kiwis through the current cost of living crisis,” Clark said.

“It will help to ensure they’re not unknowingly paying for services they do not need, or taking on debt they cannot afford.”

Clark said the new regime would help tilt the balance back towards the consumer by protecting them from bad behaviour that could leave them vulnerable.

He said reviews by the Reserve Bank and the FMA had found banks and insurers lacked focus on good customer outcomes, and had insufficient systems and controls to deal with “conduct issues”.

But the National Party which opposed the law, said neither institution had found systemic misconduct in New Zealand, only specific incidents, which were well covered by existing law.

Clark said the FMA would work with financial institutions to ensure they were prepared for the new regime, with licensing applications expected to be open from mid-2023.

Tags: CoFI

« Controversial and coming soon, but how broad is COFI’s reach?[The Wrap] The redemption of Moses »

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Comments from our readers

On 30 June 2022 at 12:06 pm Amused said:
He (Clark) said reviews by the Reserve Bank and the FMA had found banks and insurers lacked focus on good customer outcomes, and had insufficient systems and controls to deal with “conduct issues”.

But the National Party which opposed the law, said neither institution had found systemic misconduct in New Zealand, only specific incidents, which were well covered by existing law.

Typical Labour government. Driven by ideology. All they achieve is adding cost and red tape to everyone's lives.

17 more months of these clowns in office. Won’t be much left of the financial system at this rate.
On 1 July 2022 at 11:47 am John Milner said:
I'm not normally a Labour supporter Amused. But let's not forget, as far as I am aware, National are still the only party historically to have bankrupted our country.

It's one thing to be unhappy with the current government but the alternative doesn't instil any more confidence in me.
On 1 July 2022 at 3:27 pm Barbie said:
John just interested as to when National bankrupted the country, maybe before my time??
On 2 July 2022 at 10:14 am dcwhyte said:
The draft FSLAA legislation was developed in the final months of the last National Government.

CoFI was a natural extension to regulate the conduct of Banks and Insurers - just as FSLAA did with Advisers.

The Credit Card Insurance issue didn't exactly cover either Banks or Insurers in glory and there was sufficient momentum from the ARC to trigger action from NZ regulators.

Judith Collins wittering on about the poor Aussie Banks being picked on by the current NZ Government is risible.

Record $5bn profit last quarter while Kiwis struggle to pay their mortgages? Give me a break, Crusher!

For the so-called "strength to see us through the GFC" -read "Aussie Banks didn't have enough time to get their noses properly into the CDO trough.

Remains to be seen how CoFI impacts FAPs but it's landed in a much better place than the first draft!
On 4 July 2022 at 7:04 am Murray Weatherston said:
My recollection of the birth of FSLAA is slightly different.
When the Financial Advisers Act was passed in 2008, they were uncertain that they had got it right so they inserted a formal 5 year review clause.
The first stages of that for me was a meeting with 4 junior staff from MBIE about the end of 2014.
That led to a nuber of years of meetings with a revolving door of officials.
I never got the sense that the minister of the time was running the show - the ministers revolved as well from Godsmith to Dean and then with the change of Government to Fafooi.
I honestly can't identify the svengali who ran the intellectual cutter on the programme. It had to be someone within MBIE or perhaps FMA - no doubt with a bit of help from someone or someones outside the bureaucracy.
It will make for a good detective thesis for who was pulling what strings.
On 4 July 2022 at 7:08 am Murray Weatherston said:
Your memory is not wrong.
There was political spin at the changeover from Muldoon to Lange et al in 1984 that the country could not pay its bills, but that was the detonator for the economic liberalism of the 1984-87 Governemnt that is known as Rogernomics.
NZ did not default on any loans athough the spin was NZ was insolvent.
On 4 July 2022 at 11:21 am Amused said:
Hi Murray. Thank you for that informed insight.

Yes MBIE are the nemesis of all industry in New Zealand. The Ministry’s sole function now appears to be adding cost and complexity to industry when it is not needed. The whole country feels like it's drowning in compliance and regulation with MBIE in many cases been the chief architect.

I truly hope that a change of Government at the next election will see MBIE been disbanded as they are clearly no longer acting in the best interests of all New Zealanders. The changes MBIE officials recommended to the CCCFA late last year have proven disastrous for many borrowers seeking to purchase a home.
On 4 July 2022 at 11:40 am Pragmatic said:
Thanks @johnmilner: it seems that we’re heading into deja vu all over again - different government / similar outcome

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